Yes, buy perfect cheap calls now before its too late.
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The Perfect Option position
- Thread starter Maverick74
- Start date
If it does work currently, it won't for much longer. According to most people here at ET, as soon as you reveal a strategy, the bad guys will take away your edge and the strategy will no longer work. What do you think Maverick?Quote from jansen_ja:
i think this strategy doesnt work, but i hope it does, would be too easy no? At least it will work out for the brokers a good deal...
It's not the strategy but how you trade it that counts.
You didn't ask me, but I'd like to post on it anyway.Quote from VVVWaveRiderVVV:
If it does work currently, it won't for much longer. According to most people here at ET, as soon as you reveal a strategy, the bad guys will take away your edge and the strategy will no longer work. What do you think Maverick?
The idea that revealing a strategy dilutes its effectiveness is complete bunk. Considering the number of optionable vehicles alone makes any concern about the viability of this strategy moot. Add to that the fact that you could show this to 100 different traders and they would trade it 100 diffrent ways...
Guys, guys, guys, don't be so cynical. Part of me hopes most of you just disregard this strategy but the truth is, and I have said this countless times, there is no such thing as a secret strategy. I was kind of making fun of that with my first post. The whole point to that was that I knew if you thought long and hard enough about it, you guys would figure it out. Hence NO SECRETS!!!! I am trying to do my best to get people on this board to understand that there are no secrets to trading. It all comes down to understanding. Same with options. So look, check this out. I could have 100 people on this board execute this strategy and you know what would happen. I would get 100 different results. Even if they used the same stock, same months, same strikes!!!!!! It's true. No two people ever do the same thing. The point is it's not the strategy that makes you money but the execution.
This strategy does work but my guess is that there are people on here that could do a very good job of not making it work. Look, a butterfly is a butterfly, and a backspread is a backspread. We are not splitting atoms here. This is very simple stuff and it has to do with understanding risk profiles with different bought and sold strikes. Putting on a butterfly on the front month is the safest premium earning strategy there is period! Putting a backspread on a back month position is the safest way to be long gamma, period! So what you are doing is combining the two to give you something that gives you the best of both worlds. An opportunity to earn time premium on the front month and an opportunity to participate in a large price move on the back month. It's that simple.
There are so many people on ET, and I hate to get negative here, but they just seem to be really lazy when it comes to trading. You know who they are. They want to know what everyone else is doing, they want to know shortcuts, they don't want to risk money, they don't want to experiment with new ideas, they are just plain lazy. You see the threads on here, threads titled "so what stocks do you daytrade" and "how do you trade the minis" and what's the best time of day for me to trade". It's really sad that most people on this board and I will just throw out a number here, 90% will never make a dime trading. I like the options threads here because I think most of them are too scared or too lazy to venture over here and actually take the time to learn something a little more complicated. It's actually good because it keeps these threads clean and unfettered.
But I will say this on this board and hopefully I won't have to say it again, there are 10 million ways to make money in options OK? Whether or not you actually make any money comes down to your ability to execute. It's really that simple. And what I have learned is that most people can't execute their way out of a paper bag. Whether it means being able to keep their marriage together or trade options. It's why you can have a daytrading room with 100 traders in which the mkt goes completely vertical and you have 100 different p&L's at the end of the day. Well, why is that? Execution!
So I guess that leaves everyone on this board with two options. You can either learn something new and expand your knowledge and maybe apply correctly and make some money, or you can keep doing what you are doing.
Personally, I have no vested interested in your bottom line. I do have an interest in keeping these threads lively and flowing with good information about options. It keeps me sharp and I like to be exposed to different ideas and different thought processes.
So having said all this, I hope we are ready to move on. I'll be more then happy to keep discussing this strategy or we can move on to another.
This strategy does work but my guess is that there are people on here that could do a very good job of not making it work. Look, a butterfly is a butterfly, and a backspread is a backspread. We are not splitting atoms here. This is very simple stuff and it has to do with understanding risk profiles with different bought and sold strikes. Putting on a butterfly on the front month is the safest premium earning strategy there is period! Putting a backspread on a back month position is the safest way to be long gamma, period! So what you are doing is combining the two to give you something that gives you the best of both worlds. An opportunity to earn time premium on the front month and an opportunity to participate in a large price move on the back month. It's that simple.
There are so many people on ET, and I hate to get negative here, but they just seem to be really lazy when it comes to trading. You know who they are. They want to know what everyone else is doing, they want to know shortcuts, they don't want to risk money, they don't want to experiment with new ideas, they are just plain lazy. You see the threads on here, threads titled "so what stocks do you daytrade" and "how do you trade the minis" and what's the best time of day for me to trade". It's really sad that most people on this board and I will just throw out a number here, 90% will never make a dime trading. I like the options threads here because I think most of them are too scared or too lazy to venture over here and actually take the time to learn something a little more complicated. It's actually good because it keeps these threads clean and unfettered.
But I will say this on this board and hopefully I won't have to say it again, there are 10 million ways to make money in options OK? Whether or not you actually make any money comes down to your ability to execute. It's really that simple. And what I have learned is that most people can't execute their way out of a paper bag. Whether it means being able to keep their marriage together or trade options. It's why you can have a daytrading room with 100 traders in which the mkt goes completely vertical and you have 100 different p&L's at the end of the day. Well, why is that? Execution!
So I guess that leaves everyone on this board with two options. You can either learn something new and expand your knowledge and maybe apply correctly and make some money, or you can keep doing what you are doing.
Personally, I have no vested interested in your bottom line. I do have an interest in keeping these threads lively and flowing with good information about options. It keeps me sharp and I like to be exposed to different ideas and different thought processes.
So having said all this, I hope we are ready to move on. I'll be more then happy to keep discussing this strategy or we can move on to another.
Quote from Maverick74:
I'll be more then happy to keep discussing this strategy or we can move on to another.
First, I really enjoyed this thread thanks everyone for contributing.
As a newbie with options, I'd like to know more about position management...legging in, rolling months over, and exiting both when things have gone well AND when you've made a mistake. Strategies are excellent to cover, but what of managing them?
To my opinion every strategy regarding options should involve a disagreement with the marketprices of the options. So if you think some options are too cheap, and some are too expensive,
you buy the cheap, sell the expensive, and hedge it.
If you can buy a cheap and sell an expensive options of the same stock, that will be even better, because a very good hedge might be possible, and so the safer the strategy could be set up, because of the possibilty to not being exposed to gamma/vega risk.
So to me it all comes back to IV and SV.
And, partly due to complexity of options, sometimes strange prices are to be seen, and money is to be made.
Truely, I dont believe in other strategies than disagreements with marketprices by a trader, unless you know what is gonna happen tomorrow, then you just buy the stock that is gonna rise tomorrow.
you buy the cheap, sell the expensive, and hedge it.
If you can buy a cheap and sell an expensive options of the same stock, that will be even better, because a very good hedge might be possible, and so the safer the strategy could be set up, because of the possibilty to not being exposed to gamma/vega risk.
So to me it all comes back to IV and SV.
And, partly due to complexity of options, sometimes strange prices are to be seen, and money is to be made.
Truely, I dont believe in other strategies than disagreements with marketprices by a trader, unless you know what is gonna happen tomorrow, then you just buy the stock that is gonna rise tomorrow.
When this thread started it was very intriguing because I know that Maverick is a serious options trader. And it forced me to study the principles behind the greeks in order to understand the goal of the trade. So I am nowhere near an ace, but it has tuned me in to some opportunities that I have not been taking advantage of.
Thanks Mav, and thanks to all of you who participated... it made me a better trader.
Thanks Mav, and thanks to all of you who participated... it made me a better trader.
Quote from jansen_ja:
To my opinion every strategy regarding options should involve a disagreement with the marketprices of the options. So if you think some options are too cheap, and some are too expensive,
you buy the cheap, sell the expensive, and hedge it.
If you can buy a cheap and sell an expensive options of the same stock, that will be even better, because a very good hedge might be possible, and so the safer the strategy could be set up, because of the possibility to not being exposed to gamma/vega risk.
So to me it all comes back to IV and SV.
And, partly due to complexity of options, sometimes strange prices are to be seen, and money is to be made.
Truely, I don't believe in other strategies than disagreements with marketprices by a trader, unless you know what is gonna happen tomorrow, then you just buy the stock that is gonna rise tomorrow.
The problem with that argument and I'm not saying you are wrong, it's just that volatility is very subjective. What you might think is cheap premium might be expensive to others. If you just buy cheap premium and sell expensive premium, well cheap premium tends to get cheaper and expensive premium tends to get more expensive. Quite an ugly divergence could happen here. The only way to correctly take advantage of mispriced options is through trading them against their synthetic counterparts. Quite a difficult task I might add.
However, there are many ways to trade options, you can speculate on the underlying, trade the gamma, speculate on the vol, or try to capture premium. So I do believe there are many ways to skin the sheep.
What I personally believe about options, is that it's always best to put on positions that give you the highest number of profitable outcomes. But if you are making money then keep doing what you are doing, I just don't want to discourage others from thinking there is only one way to make money trading options.